As Climate Risks Surge, Companies Recruit Employees as Advocates for Sustainability Plans

New business strategies are being made to support sustainability initiatives and manage climate-related risk. While all colleagues have a role to play, turning plans into action often comes down to an organization’s management. What tactics are in place to ensure a seamless integration of climate goals into business operations? What role does a manager of risk or head of sustainability, for example, play in the process?

To discuss this further, we spoke with Derrick Oracki, managing director and actuary in Commercial Risk Solutions at Aon, who works with corporate clients around the world to assess and mitigate climate-related risks.

How can managers ensure that ESG goals and priorities, including those specific to climate change, are appropriately integrated into their firm’s overall operating strategy?

We often speak to clients that have been newly appointed to the leadership of climate risk or sustainability functions. It’s not uncommon to find them at first struggling to prioritize actions for the surging ESG and climate risk factors they are facing. To be successful at converting the company’s ESG goals into action, managers should follow these steps:

• Start with a strong understanding of your firm’s strategic plan.
• Set expectations and determine the critical investments that will pay off in the long run.
• Identify key risks and points of failure that could prevent your company from meeting its goals.
• Finally, clarify which factors are truly material to ensure all effort and resources are directed towards increasing the likelihood of strategic success.

How are institutional investors and underwriters weighing management oversight on climate risk when assessing a company’s overall risk exposure? What can sustainability managers do to ensure their company continues to remain an attractive investment?

Just as our corporate clients are looking deeper into their supply chains to understand their climate risk exposure, investors and insurers are also under pressure to measure and disclose the climate related financial risks of their investment, insurance or lending portfolios. For example, we are seeing banks incorporate the rising costs of physical climate risk into real estate loans for lending approvals. Insurers are also seeking more data to confirm that a company’s net zero commitments align with their own.

To be able to attract lending or insurance capital, management teams should clearly articulate the governance around their ESG and climate strategies. This includes using risk indicators and carbon targets to prove that they are rigorously evaluating their risk factors and tracking progress on their sustainability commitments.

How can leadership encourage employees to act as advocates for their company’s climate strategies?

More and more we are seeing that it is the employees, particularly younger employees, pushing their employers to adopt policies that align to their expectations for climate action. They’re very motivated to help companies implement their climate goals. Risk management programs are most successful at companies where there is recognition that minimizing risk is everyone’s responsibility, and climate risk is no different.

Business leaders in charge of developing a climate risk strategy should involve employees in climate risk identification surveys and workshops, solicit their ideas for climate transition actions and delegate responsibility for implementing mitigation actions to frontline employees.

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